To partner or to acquire? A longitudinal study of alliances in the shipping industry

Abstract

How do firms in the liner shipping industry choose between partnerships and acquisitions? In this longitudinal empirical study, we examine dyadic partnerships and acquisitions that took place in the liner shipping industry from 1994 to 2006. We identify and test specific factors that influence liner shipping firms in their strategic choice between partnerships and acquisitions. Using Cox regressions for our analyses, we find that two factors, the extent of redundant resources and the intensity of competition, increase the likelihood of the choice of acquisition, while a third factor, the nature of resources, affects the likelihood of acquisition in an inverted-U shaped (\) manner. In addition, the home region of a firm and prior acquisition experience increases the probability of acquisitions while prior partnership experience decreases it. The level of synergy and degree of market uncertainty do not affect the mode of alliance choice. We discuss the implications of our findings for the ''partner versus acquire'' strategic decision made by liner shipping firms.

Measuring the scope of inter-firm agreements in the container shipping industry: an empirical assessment

“…In this regard, as discussed by some scholars (Midoro and Pitto, 2000;Sjostrom, 2010), cooperative agreements are strongly driven by market factors. In particular, in highly competitive geographic markets, shipping lines are expected to experience more intense forms of cooperation, in order to avoid destabilising effects of competition (Das, 2011). Therefore:…”

“…Scholars (Ferrari et al, 2008;Parola and Veenstra, 2008;Ducruet et al, 2010) have studied the geographic scope of ocean carrier services, without expanding on the relevance of consortia and alliances within various market dynamics. In this regard, the fierce competition that is now taking place in the key geographic markets and the current unstable macroeconomic trend (Das, 2011) have discouraged shipping lines from pursuing lose-lose competitive games. Therefore, we may assume that: H2 The bigger the geographic market size (trade lane), the higher is the propensity to cooperate.…”

“…Consortia were introduced in the 1960s with the aim to reduce costs due to the introduction of new typologies of vessels. In the 1990s strategic alliances had the goal to share risk and widen carriers' markets in order to develop economies of scope (Brooks et al, 1993;Ryoo and Thanopoulou, 1999;Alix et al, 1999;Midoro and Pitto, 2000) and sometimes to test if there were sufficient economic conditions for a subsequent merger (Das, 2011). Moreover, 'coopetitive' behaviours are observed when business involves a networked industry among firms, as maritime transport definitively is.…”

Liner shipping alliances and their impact on shipping connectivity in Southeast Asia

“…Wen (2012) also observed that collaborative arrangements served to boost logistics capability and competitive advantage of shipping lines. Nonetheless, container shipping alliances were found to be inherently unstable having seen structural changes over the years (Das, 2011). Rau and Spinler (2017) observed that the intensity of competition, cost of complexity of the alliance and volatility in freight rate led to alliance instability.…”

Anti-competition of ocean shipping alliances: a legal perspective

“…Under such arrangement, sensitive information, such as trade secrets, is not shared because the allied carriers remain separate corporate entities that compete against one another (Das, 2011).…”